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This is a limited access to the Query Desk, where we share some of the Queries we have answered. These are not recommendations, but a casual chat between a client and his advisor.


05, Aug 17


Subject: Weighted beta

Could u put up a table showing beta factor each stock and overall model portfolio weighted beta 

Admin Reply

Hi Sir, 

The Beta for the Portfolio now 1.2 against the Nifty. Beta is not a good measure of risk except in books. Beta would be a good measure only if it sustained at those levels but that happens in my CFA books only. I recommend you to read james montier book on behavior finance, especially the chapter why CAPM is crap.


Warren Buffett believe buying at the Price Valuation is the best measure of risk managment.


My fav Hedge fund manager Paul Tudor Jones believes your Risk equals to your Stop Loss and thats the Best Measure of Risk.


Quantitative guys believe that anything that can be measured, can be managed. So they use beta to measure risk but beta changes and normally too late as its backward looking. 


We at Stallion Asset believe Risk is not knowing what your doing. We are in the game of probabilities, we understand risk, there are risk we are willing to take sometimes and there are risk we are not willing to take. 


Reliance Capital is hitting 52 weeks and someone asked me that what will happen to it if Reliance Communication Defaults? I Told that your not the only person who knows this that Rcom will default, the entire market knows it, the risk is adjusted and odds are reliance capital will not go below 700.


My Point is that beta is not a good measure of risk.


28, Jul 17


Subject: Howard Marks Memo

Hey Amit,

I read a recent memo by Howard Marks of Oaktree Capital where he highlights several risks faced by the world and prospective returns look very low.

He manages a debt fund but is one of the best guy in the world to assess risk.

He compares the situation with Tech Bubble and 2008 crisis and warns investors to be cautious

What is your take ? Are we in the fnal leg of the bull run and need to cautious ?

I have attached the link and it's an interesting read.Kindly provide your views

Admin Reply

HI sir,

Thanks for the Memo, read it a few days back. A Good read indeed.


Haward Marks in his memo "There They Go Again" in 2005 had predicted a market crash but it only happened in 2007. I am not saying a correction cannot come, what i am saying that i dont see a greed rally yet to see a big enough crash. Minor Correction of 5-6% can happen.


If you see the Midcap Index today, it just hasnt rallied, it was a 18500 on 21st May 2017, and 3 months later its exactly at the same price or probably 1-2% lower. The Rally has been in Sensex because reliance has 9% weight in Sensex , and has rallied 50% in last 3 months, that alone has contributed about 4% out of 10% rally in Sensex. 


I am not ruling out a Short term 5-6% Correction, it can happen anytime, but my understand is that we are in a long term bull trend for next 2 years.


P:S Golden Rule of Investing - Market correction's happen when most expect that it won't. 


25, Jul 17


Subject: Learning the Stock Market in 5 years

Hi Amit,

Learning a lot from you and very influenced by your thought process. There are only a few people in the stock market who can write with such clarity of thought as you.  I am 30 years old, how can i learn the Stock market, i am ok if it takes 5 years as well?

Admin Reply

Hi Sir,

Thank you, i learn everyday from reading newspaper, books and by mistakes. 

2010-2013 i realised that i need to catch one bubble to be really rich and believe me i have read every book possible on catching a bubble. I understood that i need to right a few times to create a lot of wealth and that become a goal.


I read about people who have got really rich investing in the stock market, thier rights and wrong - Warren Buffet letter taught me how to value a Stock, Martin Zweig & William o Neil taught me how to pick a stock and jesse Livermore taught me how to hold a Stock. 


Believe me Sir, You get what you really want from markets. I am now learning psychology from Ed Sekyota and thinking to join Trading Tribes in Mumbai.


07, Jul 17


Subject: Rationale for exclusion of Avenue Supermarts

Hi Sir,

Since IPO listing, Avenue Supermarts have gained around 200% till date making it one of the largest companies on the basis of market cap. Long term investors have enetered in the stock even post IPO listing. The Company has shown strong sales and profitability growth. Despite positive analysis by Stallion Asset during D-Mart IPO, why this stock has been excluded from the model portfolio.


Admin Reply

Hi Sir, 

We at Stallion are growth Investors which is true, but we buy growth only at a reasonable price. D-mart at Listing was trading at 80 times PE multiple, which i thought was crazy but now it trades at 110 times PE Multiple. 


I Understand that the returns given are amazing but we cannot be part of every party, just not possible. We did what we thought was right at that point of time. At 450 i would have definately been a buyer in D-mart but 600-650 was just too much for me. 


Once you pay fancy valuation, its hard making disproportionate amoumt of money. Time and again market teaches me that there is a difference between a great business and a great Stock, as much as i love the business of D-mart, i am Indian and look for value for Money.


19, Jun 17


Subject: 10 Year view

Dear Amit,

What is the thing that u certainly want to observe in Indian stock market if ur given superficial power to go in to 20 years future and come back to real world. Is it points at which nifty will trade,how high the companies valuations are, portfolios of billionaires or identify next Google or Microsoft of india?? 

Question may seem to be bit amusing but need an answer.

Admin Reply

Hi Sir,

20 Years from today, The World will be fully Digital. My Understanding is that the next google or apple or uber will also be a consumer facing business who solves their problems. 

The way advertisements will work will change, today i spend 10-15 mins while eating my breakfast watching TV, whereas i spend atleast 15 hours on my Phone and Computers. For Advertisers to find me, they will havto come on my computer or Mobile.

Mobile is like the Electricity of 1906, it will change life forever. Let me give you an Historical example, 1906 General Electric backed had famous scientist thomas edison and between 1906 to 1916 GE went up 17000 Times. The ancillary companies like Poles, wires etc went up 1000-2000x. That was mad wealth creation.

Between 1917 and 1929 (Just before the great depression) radio was introduced and it was the only form of entertainment, news etc and those stock gave 600-700 times return though in the same time electricity poles cracked 80%. So What i mean to say is that we have internet and Mobile as the Big Trend and it is the things they do that will create a lot of wealth.

So Technology right now is Helping a company like Bajaj Finance in less a 1 minute do a credit check to the person it giving loans. Capital First in its latest presenation write that their algorithm says the 99.99% people who are in the age of 25-35 and married dont default on their loans. Basically what i am trying to say is that technology has made it possible for Industries like Microfinance to exist where a Loan officer via his IPAD can check if the women has taken loans for more than 2 microfinance companies, the credit history to that women etc.

Probably the Bull Market of NBFC will end in 2018 or 2019 or 2020, i dont know but the next bull market will be of a completly different segment backed by Technology. It can be companies like Infoedge who are direct technology plays or some industry whose way of doing business has changed due to technology. 


11, Jun 17


Subject: SP Apparels

Hi Amit,

Lots of thanks for identifying good stories with momentum and anchoring us to hold the stocks we are buying.

SP Apparels appears to be a great story in its infancy. Maybe Kitex in the making. Can u please give your views.

  1. Fourth largest player in the world Children’s wear after Gimmel (China), Wingloo(Singapore), and Kitex(India)
  2. Clients include Tesco, George ASDA, Primark, Mother care and Dunes
  3. SPAL’s realisation is Rs.118 per piece per garment as compared to Rs.45/piece for Kitex
  4. Has got two divisions – garments (for manufacturing and export) and Retail for manufacture and marketing under Crocodile brand) (currently 9% of the total revenues)
  5. Retail division making losses expected to turn around this FY
  6. Promote is holding 60%, Ashish kacholia - holding 4.4% (increased from 2.43% in Sep 2016 to 4.47% in March 2017. Goldman Sachs holding 5.32 and DSP Black Rock Microcap fund – 3.97%
  7. With the Proceeds of IPO in FY 16 reduced the DER to 0.4. Expected FY19 EPS - 38.9, PE 10.4, EV/EBITDA of 5.3, ROE - 19.5% and ROCE of 20.8%.
  8. Established relationships with top 2 grocery retailers like ASDA, TESCO and others is a moat as manufacture of Children’s clothing is complex and is  a high entry barrier business.
  9. The Company is going for backward integration with own funds for expansion of sewing, knitting and dyeing capacity  which is expected to improve OPMs significantly.
  10. Kitex’s margins are  35% whereas SPAL’s are at 16%, With the additional capacity and debottlenecking there is significant room for margin expansion.
  11. Hedges 80% of the its forex exposure on getting the orders (addresses your concern of export businesses)
  12. Global Children’s wear market is expected to reach USD 300 billion by 2019 at a CAGR of 6%

Admin Reply

HI Sir, 
Thank You for an Amazing Write up. 
You have already written a lot would just like add 2-3 More points

1) The Company did Profit of about 62 Crores in FY 2017, It will grow revenues at 15-17% going forward but profits are expected to Increase at 35%+ levels for next 2-3 years, Expect them to do 150 crores of PAT by FY 2020

2)  My understanding is that the Company will trade at premium valuations(Considering its an Textile) of 15x 2020 i.e. about 2250 Crores of Market Cap conservatively. The Current Market Cap of the Company is 1150 Crores and is definately a doubler in next 3 years according to me

3) Biggest Risk- Client Concentration - They have only 4 clients now, may go to 6 clients. Even if there is one loss of client the game become very difficult for the same. The retail business in UK are facing major problems of thier own and stiff competition from online players like CLUB FACTORY (Orders come from China, not India).


19, May 17


Subject: max india

Max india which houses: 1. max hospitals (46% will now increase to 50% - also pormoters buying at cmp). Revenues are increasing at 25% in the past and expected to be in this range for many years to come. 2500 bed capacity will increase to 5000 in next 4-5 years. also 50%+ revenues comes from super speciality care which means more valuation per bed. medanta deal happened at 3+ crore per bed. Also further expansion will be in nature of brownfield so capex will be less.

2. max bupa : 51% stake. GWP continously up by 25% in past and is expected to be between 20-25% for many years to come. 5400+ branches.

3. antara: launch is nearby. senior residents society. 

4. pathology business which hitherto was b2b will now be b2c as well. mgt. has some aggresssive plans to expand it in delhi,ncr region

Business is available at 4000 cr market cap where growth visibility is strong (25%+) for many years coupled with increasing middle class and increasing peneteration of mediclaim business. Also mgt. adds icing on the cake. Your valuable views regarding the same. I have added it as part of core portfolio for last couple of months.

Admin Reply

Hi Sir,

There were 2 Queries on Max India and i am answering it here.

Max India is a part of stallions top 20, now i am scared to write this because in history whenever i disclose the stock somehow runs up without giving me a chance of buying it. 

I am a big fan of analjit and he has the capability to be the next piramal. He understands valuations and how to build value. Since you have already given a brief Write up about it, for the understanding of our clients i will explain the valuation
Max India has a Market Cap of 4000 Crores plus 300 crores of warrents issued i.e. about 4300.

1) Hospital Business - Max India lately has acquired 3.75% Stake of IFC in Max Hospital business for 211 crores valuing the hospital business for  5600 crores. Max India's Stake in Hospital Business will rise to 50%, i.e. valuation of 2800 crores.

2) Max Bupa - 23% Stake was sold for 206 in Max-Bupa general insurance in 2016 valuing the total company at 895 Crores, i.e. now Max India has 51% stake in it and you can value it at 450 crores.

So Now we know 2800+450 is the valuation of the those 2 business'

3) Antara and Promoter -  Antara is pretty small right now, and we dont know how to value it. There is Promoter being amazing valuation as well attached to it. So broadly we are paying 4300-2800-450= 1050 crores for it. 

2800+450 Crores is a definately the worse case valuation for this company i.e. about 110-115/Share. (we have excluded Antara and promoter Premium here). The Promoter buying at 154 is a positive for us. If in this correction max corrects, we may enter it with a 3-4 year horizon. 


07, May 17


Subject: Query About Strategy

Hi Amit,

Big Fan of you, getting bigger reading the query. Havnt seen as much clarity in Anyone else apart from you. Every word in your reports and monthly newsletter is worth a re-read.

My query today is the some query back you said that we invest in a pattern not a stock, could you please add some colour to it.

Admin Reply

Thank You Sir for motivating me, 

Patterns repeat in the financial markets. Only the names of the winning stocks change

High growth is rare, and financial markets reward it generously. We look at those companies that can grow at 25%+, Frankly, I’ve never been able to predict which stocks will go up tenfold, or which will go up fivefold or even 2 fold. I try to stick with them as long as the story’s intact.

And Atlast Never love anything that cannot love you back. The market doesn’t love anyone.- We always need to Manage our risk.Sooner or later, though , every trend ends, we need to know when to exit.


30, Mar 17


Subject: Inox Leisure

Hello Amit

What is your view on Inox Leisure for long term . Rational :19% share of multiplex in india covering south, north, east and west with approx 450 screens. Inox is ranked 2nd after PVR in the collection. it has good track recod of expanding by adding screens every month (2-3 month). They have target of reaching 800+ screens in coming years.There seems to be a valuation gap and might get re-rating . GST will be one of the key factor in future.


Admin Reply

Hi Sir, 

Sorry for the late reply, there has been massive value mitigation which is happening in Cinema space from unorganized single screen to multiplexes in last 1 decade. Today there are 4 main player PVR, INOX, Cineline, and Big Cinemas. These 4 command 70-80% market share. To your question on Inox, i believe Inox is rupa and Pvr is Jockey. PVR is way better than INOX and will always command a premium. The total market cap of cinema business is 1 Billion$ for PVR, 400 Million$ for Inox which is very small taking in context with the opportunity size.
Lets compare both these companies, End of 2016, Inox had 420 screeners wheras PVR had 550. Average Ticket Size of PVR is higher at 188 v/s 167 for Inox for 2016, though inox prices have gone up to 182 in december 2016. The Real Difference between the 2 companies is occupancy rate which is on average 33% for PVR whereas only 27% for INOX. if inox can scale up the occupancy rate margins can improve a lot as the average food and beverage revenue which is high operating margin product also increases sustaintailly. Avertisement revenue can be the game changer for INOX where in 2016 they did only 90 crores whereas PVR did 210 crores. Remember avertisement revenues straight hit the bottom line as there is no expense invovled.
I believe you can do a SIP on PVR and INOX both add more of every dips. Its one of the top 30 ideas at Stallion. 


25, Mar 17


Subject: Solar

Hi Amit

Do you have any solar companies in radar from small cap, microcap which could be a multibagger . So much attention on power especially solar in India for next few years.


Admin Reply

Hi Sir,

Renewable are a very risky space. I believe they are the airline industry of 19th Century where when though they will help the society and are wonderful, they wont be able to create an wealth. The competition is high, out of the top 20 solar companies in the world, 7 have already gone bankrupt in last 5 years including one of the largest solar company Sun Edison. However the opportunity size is large, but the technology change is rapid. So prices of solar energy/unit was 13/unit, 2 years back, now its about 5/unit. Coal and Thermal based are at 2.5-3/per unit. Solar is definately the future but i dont know which horse on ride on and if they will create wealth for shareholders. I will give solar a skip.

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